The allure of gold among wealthy Asian investors has surged, countering a notable decline in traditional applications such as jewelry and dentistry. According to the World Gold Council (WGC), the demand for physical gold bars in the over-the-counter (OTC) market, particularly driven by family offices in Asia, propelled gold to its strongest second quarter performance in at least 25 years.
Joseph Cavatoni, WGC’s chief market strategist for the Americas, highlighted that affluent individuals and asset managers across China and neighboring regions have turned to gold amid mounting concerns over credit, debt, and financial stability. Holding physical gold provides them with a sense of security amidst today’s rapidly evolving economic landscape. Notably, Asia is home to over one-quarter of the world’s wealthiest individuals, as reported by Bloomberg.
In the second quarter, OTC purchases amounted to 329.2 metric tons, contributing to a total demand of 1,258.2 tons, up 4% compared to the previous year. Excluding the robust OTC market activity, overall demand would have seen a 6% decline, largely due to a sharp reduction in jewelry consumption.
The report from WGC sheds light on the underlying dynamics of the global gold market, which recently witnessed soaring prices. Anticipation of interest rate cuts by the US Federal Reserve has lured more investors into the exchange-traded funds (ETFs) market, while the metal continues to benefit from steady purchases by central banks and geopolitical tensions, including the volatile US presidential campaign, which enhance its appeal as a safe-haven asset.
Joseph Cavatoni emphasized, “Central banks remain significant players in the market. Despite a slowdown in China, countries like India and Poland have sustained their gold purchases.” Central bank buying has increased by 6% year-on-year, although it has moderated from the brisk pace seen in the first quarter. In contrast, consumer demand for jewelry has contracted approximately 18% quarter-on-quarter, reflecting heightened price sensitivity.
Simultaneously, the OTC market demand has nearly matched jewelry consumption, historically a primary driver of global gold demand. Wealthy investors favor the OTC market for its discretion, conducting transactions primarily through dealers or directly between parties without relying on exchange platforms or clearing houses.
Looking ahead, the WGC anticipates gold prices to “maintain or gradually build upon current levels” in the latter half of the year, with gold already showing a year-to-date increase of approximately 15%.
